25/06/2010 : Football League Blog : Pressure Grows For League Sporting Sanctions To Be Increased

25 June 2010 : Pressure Grows For League Sporting Sanctions To Be Increased

League One side Swindon Town have become the latest club to call on clubs that go into administration to be relegated. The move is an interesting one as it was only on June 3rd 2010 that the Robins put out a press statement indicating that the Creditor Voluntary Agreement (CVA) that had been hanging around their necks had been formally discharged.

Swindon have been in administration twice in the last 10 years - once in February 2000, and then for a second time between March and August 2002. Had such a rule been in place at that time, the Wiltshire side would have twice been forcibly relegated, something that Chairman Andrew Fitton seems now willing to accept would have been morally justified.

Fitton has also told the Swindon Advertiser that he thinks that some sort of wage capping needs to be imposed upon clubs and believes the current Sporting Sanctions are not working properly:

"We all know there will have to be some sort of wage restriction, either by capping or the same as League Two limiting the total wages to a certain percentage of their turnover. But there will also have to be some sort of different sanction for clubs who get themselves into administration, because a 10 point deduction doesnít seem to be working. If you go in then you will get relegated - end of story."

Fitton is now one of several clubs who have stated that they would support relegation for clubs who fall into administration, with Sheffield Wednesday, Oldham Athletic, Bristol Rovers and Hereford United (albeit under previous owner-manager Graham Turner, who is now first team manager at Shrewsbury Town) all calling for greater punishments. However, the biggest campaigner for increased sanctions has been Leyton Orient Chairman Barry Hearn, who put forward a motion for clubs to receive a double relegation in such circumstances.

Swindon are a rare example of a club that has suffered relegation for off the field matters - demoted in the summer of 1990 after they breached League rules for illegal payment to players - and Fitton adds that the way that the Robins suffered gives his side a unique perspective. He believes that making deterrents clear will scare club owners into action:

"There has even been a proposal that you could go down two divisions. We have been sympathetic to that because Swindon have been in that position before in the past when they were demoted, so know how tough it is. But if people know the consequences of going bust would they take those risks? I think something will have to be done and it will force people to take action. Nobody knows exactly how to deal with it though, and so what is happening at the moment is that people are finding that as a reason for not doing anything and thatís not good enough. Eventually it will have to deal with it because it is going to become a very serious issue. Football is forced to look at it, but whether any real action is being taken, I donít know. In my opinion we will have to have a disaster for it to happen. A club will have to go under."

Whilst this site has vehemently supported the campaign to increase the Sporting Sanctions for going into administration, there has to be a little more caution on any proposals to bring in Wage Capping and how that would be structured. Businesses are entitled to take calculated risks - a business that does not take any risks is as much in danger of stagnating and ultimately going backwards, as a business that takes excessive risks.

In terms of Wage Capping, imagine the scenario where a club is near the bottom of a division, brushing with relegation. At a crucial point of the season, their leading goalscorer breaks their leg. Their manager goes to the board and asks for a replacement. The board calculate that a replacement striker will cost them £100,000, but also calculate that the cost of relegation in lost sponsorship payments and gate receipts lies at around £500,000. They realise that the risk of relegation is too great to leave to chance and so give the manager the green light. At this point, the Football League step in and block the signing of the £100,000 striker because they tell that club it would push them over their wage limit. The club therefore can't sign their striker and as a consequence are relegated, making them £500,000 poorer.

Whilst no-one wants a club to be allowed to over-spend recklessly, the above example shows where a club actually may end up worse off if it is prevented from spending money when urgently needed. We might keep our own personal 'family budget' to a strict level, but when the car breaks down, or when the central heating packs up, sometimes we have to bite the bullet and break into the savings we promised ourselves we wouldn't touch. To not do so would cause worse damage.

The other concern about Wage Capping is that it tends to encourage the more borderline payments and benefits that the Football League might want to discourage. Suppose a football club owns houses, or company cars. If their Wage Cap only allows them to pay a player a certain amount, they may choose to supplement the 'value' of the deal with that player by allowing them to live rent-free in a house, or by giving them a car to use. If you start to extend that as far as living allowances, or by treating mortgages on a second home as 'expenses', then you're very quickly heading in the same direction that our country's MPs have gone down. Although perhaps moats and duckhouses are not quite the sort of things that footballers collect.

The last concern about wage capping is how exactly you police it, and set the capped rates. It would be unfair for a club the size of Southampton or Norwich City to be capped at the same rate as Hartlepool United or Walsall. So it has to be done as a percentage of company turnover or similar. The main issue there is that the availability of accurate figures within such a company and the size of them may vary from month to month, and more accurate figures are only to be gained through accounts filed to Company House. If wage caps are based upon short term recent information, they may suffer from inaccuracies and fluctuations, and even the danger of clubs flexing their monthly records to push any figures they don't want on the balance sheet into the previous or following month. If the wage caps are based upon more stable long-term 'official' information, then it risks discounting recent cup runs or outgoing transfers that have given a club a windfall they want to be able to spend.

At present, there is a system of wage capping in place at League Two level, which limits clubs to spending 60 percent of their turnover, and the same rule applies down at Conference National level. So far, clubs at League One and Championship level have thrown out demands for a rule change in those divisions. The current penalty at League Two level is for clubs to be placed under a transfer embargo, which happened to Notts County briefly when their former owners Munto Finance pulled out during last season, leaving a new consortium having to balance the books.

Even so, after being on the end of some fierce criticism from their fellow League Two Chairmen, who were angry about the way the situation had developed, County were able to claim that they were in the end operating at 54.9 percent of turnover and thus were operating within the wage cap rules. There is little doubt that earlier in the season they operated above that level - Sol Campbell on £40,000 a week, and Kasper Schmeichel on £15,000 a week were on their books and Munto Finance's promises turned out to be hollow. In the midst of that season they received a winding up order from HMRC - precisely the sort of event that wage capping in League Two is meant to make impossible. Hence at present, it's clear that the rule in place at that level needs fine-tuning at the very least, and until that is done successfully, it's unlikely that Championship and League One clubs will be too keen in taking it on.

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